Bloomberg's 'So-Called' Financial Lexicon

Every time I write about financial journalism, I always end up sounding cantankerous and bitter. So let’s start things off with some genuine praise. The story “Biggest VIX Drop Hides Options Bets S&P 500 Will Fall” yesterday from Bloomberg includes the following:

The reading indicates a 68 percent likelihood the S&P 500 will fluctuate as much as 7.3 percent in the next 30 days, according to data compiled by Bloomberg. That compares with the VIX’s all-time high of 80.86 in November, when traders priced in a swing of 23 percent in the S&P 500.

It’s nice to see some mention of the fact that volatility indexes measure expectations within one standard deviation of the mean. It is a simple point, but ignorance of it can lead to all manner of absurd proclamations (as I’ve discussed before). So again, nice to see Bloomberg getting it right.

However, whoever manages their style guide needs to give me a call, on pain of semantic confusion. In the same story cited above, we read:

The premium on so-called put contracts increased even after the Chicago Board Options Exchange Volatility Index, a gauge of U.S. options prices known as the VIX, fell 40 percent last quarter.

I apologize for the pedantry below, but this usage is just grating. And more importantly, it appears constantly in Bloomberg stories. If you don’t see the trouble, read on.

The English adjective “so-called” has two meanings, and neither of them is appropriate in this context. The first meaning is that the name being given is a popular or common one, with no negative connotation. One convention of usage is to give the formal or official name, if available, along with the popular term, e.g. “the so-called CAFE standard, or Corporate Average Fuel Economy.” The second meaning casts doubt on the correctness of the term, as in “she was abandoned by her so-called friends.”

Again, neither meaning is appropriate here. “Put contract” is not, on the first interpretation, the popular or attributed name for some alternately-named entity that gained popularity in Chicago and that gives its buyer the right but not the obligation to sell the underlying asset at a specified price at some future date. Such an entity just is a put, in the same way that an object that usually tastes sweet and keeps the doctor away if consumed daily just is an apple. It’s not a “so-called apple.”

Bloomberg doesn’t give an alternative or more official name for put contracts (since there is none), so if we are to apply the first interpretation of “so-called,” we can only wonder at the lax approach to other terms: if the editors were being consistent, shouldn’t we also read about the “so-called stock market” and the “so-called Standard & Poor’s 500 Index”? After all, it’s only called the Standard & Poor’s 500 Index because the company chose to call it that, and on this hyper-attributive semantics, it’s apparently essential to note that all language is conventional before the use of each noun.

The reductio above suggests that we look to the second meaning of “so-called” for some clarity. But reading “so-called put contracts” in a skeptical or repudiating spirit doesn’t make sense, either. And interpretive charity requires we assume that the editors don’t intend to suggest that, while these derivatives have been known as put contracts, they’re really something else entirely, as though the CBOE actually exchanges chocolate eclairs.

But then the “so-called” in that phrase either a) causes confusion, if you require that it mean one of its available meanings, or b) fails to signify, if you’re so forgiving as to treat it as a meaningless cipher.

Either way, it should be removed. I haven’t even discussed the other attributive nonsense in the same sentence, the clause that includes “known as the VIX.” Bloomberg stories are always and forever taking a disquotational approach to the three letters V-I-X, as though traders the world over talk constantly about the Chicago Board Options Exchange Volatility Index and only some traders also refer to it as “the VIX.”

Clearly, the opposite is the case. And as I said, this isn’t a one-off mistake, but a regular phenomenon: this recent story about the VIX speaks of “so-called implied volatility, which measures the expected price swings of an underlying asset and is a barometer of options prices…” Again, neither meaning of “so-called” makes any sense, unless you think that what people call implied volatility isn’t really implied volatility, or that it would also make sense to speak of “the so-called unemployment rate.”

The most plausible explanation I can muster for this attributive tic is that the Bloomberg editorial staff is prepared to sacrifice readability for the sake of its readership, who are known as particularly unsophisticated when it comes to options. In other words, “so-called” has a new meaning in the mouth of a Bloomberg editor, namely, “here’s a term that you surely don’t know, and we’re going to define it for you in just a second [which is another supremely annoying and style-murdering tendency -Ed.], but so that your pampered and minimally literate Hamptons-summering ass doesn’t feel threatened, we’ll denote that this term is just a thing people use to refer to something else, i.e. isn’t it cute how the middle classes have to bother about learning such dirty things as words?”

Comments

[SA Editor M...:]

Jared, I admire your restraint in not pointing out that even that Bloomberg headline requires a sentence diagram to figure out.

Jul 07 10:20 AM

[Condor Options:]

Thanks. We don't want to be so critical as to make the cause of reform look hopeless.

Jul 07 01:04 PM

[reluctantQuant:]

Good to see we have a so-called William Safire for the rarely-referred-to "log-o-fin-asphere".

Methinks the journalists over there are equally tired of the "write for Dear Aunt Sally" style requirements. Apparently, though, Sally reads the online content, too. All those stories must pass muster in that regard before hitting the wire/web/cloud. And Dear Aunt Sally writes in every time they misrepresent the kurtosis in the vol skew, "youbetcha."

--rq

Jul 08 11:25 AM

[RogerOD:]

so-called "torque foot," so-called "planetary opposition," so-called "harmonic third." the postulate that "put option" is any more empiric than any of these usages is typical of someone promulgating a vernacular meant to confuse suckers, ie options salesmen. my point may not be a priori correct but it is tenable, and that fact makes the amount of ink spilled above and the manner in which it is spilled totally absurd.

Jul 20 04:46 PM

[Condor Options:]

RogerOD, I'm not sure I understand what you're saying. Are you saying that the vernacular of a typical reader of an article about options doesn't include "put option"? I suppose you'll also argue that a typical reader of science journals won't have heard of "planetary opposition"? And the readers of Roll Call won't have heard of the filibuster?

I fail to see how your view is tenable, or even remotely plausible.

On Jul 20 04:46 PM RogerOD wrote:

> so-called "torque foot," so-called "planetary opposition," so-called
> "harmonic third." the postulate that "put option" is any more empiric
> than any of these usages is typical of someone promulgating a vernacular
> meant to confuse suckers, ie options salesmen. my point may not
> be a priori correct but it is tenable, and that fact makes the amount
> of ink spilled above and the manner in which it is spilled totally
> absurd.

Jul 22 09:03 AM

[RogerOD:]

A cursory examination of Bloomberg's style shows that they are at pains not to traffic in professional jargon. "Put options" are described first as "bearish bets in the options market" or "contracts that pay the owner when a stock falls to a certain level." Similarly, their stories about CDS begin with the description "The cost to protect against a default by...," and then later refer to them as "so-called credit default swaps." The same is generally true of clawback provisions, lock-up periods and CDOs. Obviously, their use of "so-called" is intended to alert the reader that the following term may not be in general usage.

Arguing that this shouldn't be the case is tantamount to arguing that Bloomberg stories should read more like stories in Institutional Investor or the Journal of Finance. And making an argument that any wrritten communication should be more obscure is bizarre -- what is the point? Well, I guess there is a point if you're (a) a salesman who benefits from a usage that makes his complicated products seem benign ("you need to be in auction-rate bonds") or (b) benefitting from confusion among his potential customers. Let's see, yeah - I guess an option salesmen fits this description.

That you read "so-called" as stigmatizing is what lawyers call "action with consciouness of guilt." You don't want your business to be identified as exotic because it complicates your abiliity to make money.

Jul 22 12:35 PM

[Condor Options:]

So you think put options are just as "exotic" as CDS, CDOs, etc.? Sorry, that's just a bizarre view. Options have been traded on the CBOE since 1973; CDS didn't even exist until the 1990s, and the CDS market didn't blossom until around 2000. If you're familiar with either category - vanilla exchange-traded options or structured finance - it's apparent that there's nothing exotic, professional, or unusual about calls and puts when compared to bespoke derivatives and products that institutions trade with themselves.

I like how you bring in ominous legal jargon there at the end and tie things up with a nice ad hominem attack. Classy.

Jul 22 05:24 PM

[BadBryanK:]

So-called classy.

Jul 22 07:06 PM